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Rakhi Vasavada
Rakhi Vasavada, Financial and Legal Consultant
Category: Finance
Satisfied Customers: 4473
Experience:  Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
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I have a client that has an LLC he brought me s profit and

Customer Question

Hi good evening i have a client that has an LLC he brought me his profit and loss statements but on the P&L statement all the owners draw transactions that he took for the year of 2014 don't show there and he took $35000.00 thousand owners draw and on the P&L statement the profit shows $60000.00 So should i list add the $35000.00 thousand to the $60 K so the total profit will be $95000.00 or what im supposed to do , please advise ?
Submitted: 8 months ago.
Category: Finance
Expert:  Rakhi Vasavada replied 8 months ago.

Dear Friend,

Hello and welcome. Thank you for providing an opportunity to assist you.

NO -- Owners draws are NEVER listed on Profit and Loss Accounts.

I believe, the LLC, here in this case is treated as Partnership and Not as Corporation. An LLC that is treated as a disreguarded entity or a partnership allows owners to take draws. That means owners are not treated as employees and are not issued paychecks. They take draws just like a sole proprietorship. The draws are listed under the equity account for each partner. The Equity accounts show up on the Balance Sheet not on the Profit Loss Statement. Each partners equity account should have two sub-accounts - one for investments and one for draws.

So, the profit will remain unchanged and you would record the draws as mentioned above.

I am sure this would help.

You may please leave a positive rating if this helps as this is the only way we are compensated for assisting you. Alternatively, you may revert back with a reply if you need further assistance or if I have missed out on any aspect of your question.

Warm Regards,

Customer: replied 8 months ago.
do i need to report to the irs just the 60K what about the $35 that he took out ?
Expert:  Rakhi Vasavada replied 8 months ago.

Hello and welcome again.

YES, you would report to the IRS just the 60K.

So far as the money that he took out are concerned, draws are they way to handle owner payments. The partner that took draws will be stated on the tax return and the resulting Schedule K-1. Each partner is responsible for his/her own taxes at the end of the year. Your LLC is a pass-through, partnership. That means the LLC gives all the profit and losses to the partners based upon the percent he/she owns in the company.

I am sure this would help.

You may please leave a positive rating if this helps as this is the only way we are compensated for assisting you. Alternatively, you may revert back with a reply if you need further assistance or if I have missed out on any aspect of your question.

Warm Regards,

Customer: replied 8 months ago.
Well this is a business one member llc so everthing will go on schedule c , my concern was if i need to add the $35 that he took out from the business
Expert:  Rakhi Vasavada replied 8 months ago.

No, I don't think so. You will record it as a owner draw. The profit should remain unchanged.

I am sure this would help.

You may please leave a positive rating if this helps as this is the only way we are compensated for assisting you. Alternatively, you may revert back with a reply if you need further assistance or if I have missed out on any aspect of your question.

Warm Regards,

Customer: replied 8 months ago.
if im s corporation i can just take dividens or distributions and dont pay taxes on that right?
Expert:  Rakhi Vasavada replied 8 months ago.

Yes, Very correct.

I am sure this would help.

You may please leave a positive rating if this helps as this is the only way we are compensated for assisting you. Alternatively, you may revert back with a reply if you need further assistance or if I have missed out on any aspect of your question.

Warm Regards,